The Competition Commission of India (CCI) had implemented an automated mechanism of clearance for combinations under the Green Channel route as part of its continuing policy to make Mergers and Acquisitions (M&A) applications easier and speedier. When the notice is submitted in the required format, the combination is considered to have been accepted under this mechanism. For parties requesting permission under the Competition Act of 2002, this approach aims to drastically cut down on transaction time and expense.
PROCEDURE OF FILLING
The informing parties must assess for themselves if the Green Channel Criteria have been satisfied to file via the “Green Channel” method. The notifying entities must provide a legitimate and have to submit Form-I with a statement stating that the planned combination fulfills the Criteria and “is not anticipated to produce any detrimental effect on competition” if such requirements are satisfied. The CCI will send an “acknowledgement”. Based on this filing acknowledgement, the parties to the combination may move forward and finalize their deal. It is important to remember that “Green-Channel” submissions have fewer revelations obligations. In particular, the CCI is not obliged to receive information on market size, share, or competitors. The CCI may certify the deemed approval to be void ab initio and review the filing in compliance with the Competition Act, 2002 if it later determines that the transaction does not qualify for the “Green Channel” path. However, before making any orders that would rescind the presumed approval, the CCI would give the parties a chance to be heard.
UNIQUE MERGERS FILING SYSTEM WITH INSTANT APPROVAL
In comparison to other required notification countries throughout the world, India’s Green Channel clearance for combination applications is a special approval procedure. Legally, each merger and acquisition (M&A) transaction must follow a particular period before closing and also have to go through the regulator’s clearance. By launching the green route, the CCI has unlocked the field of self-assessment by companies of the combination before filing the notice. Under Regulation 5A of the CCI (Combinations) Regulations (Procedures in Commercial Transactions Related to Mergers) Regulations 2011, the combination is deemed to have been approved by the CCI under paragraph (1) of section 31 of the Act, upon filing and confirmation of a notice.
GREEN CHANNEL NOTICE ELIGIBILITY CRITERIA –
The Amended Combination Regulations’ newly added Schedule III offers parties assistance for self-evaluation to determine whether the combination qualifies for the green route. It stipulates that if the parties to a transaction have no alternative market definitions after taking into account all: -horizontal overlaps (i.e., they must not involve manufacturing any, similar, or substitute goods or services); or vertical overlaps (i.e., they cannot do tasks at various levels or stages of the manufacturing chain); or overlaps between complementary goods and services (i.e., when two goods or services are joined, they increase the value of the combined commodity or service).
Additionally, each entity in which the parties to the combination may, directly or indirectly, own shares or control must be examined for overlaps with both the parties to the combination and their respective group businesses. However, the expression “shares and/or control” only refers to organizations that a party:
- 10% or more direct or indirect ownership of the company’s shares; or
- right or capacity to execute any such right that is not accorded to regular shareholders;
EXPERIENCE SO FAR
Investment holdings organizations, alternative asset management firms, insurance services, medicine producing firms, the airport services industry, and security firms are just a few of the industries in which the Green Channel has been registered. organizations. The CCI received an overall 25 combination notices from October through December of this year, of which 5 came from the Green Channel. So far, 50 Green Channel cases have been authorized by the CCI. The simplicity of clearance offered by the Green Channel method may reassure many industries, particularly the healthcare industry, in light of the COVID-19 pandemic. For the purchase of Essel Mutual Fund by BAC Acquisitions, a company run by Sachin Bansal, the CCI got its first approved channel route combination. As the target company operates in an entirely other industry than that of the acquirer—mutual funds—there was no horizontal or vertical overlap. They affirmed that the proposed merger of BAC Acquisitions and Essel Mutual Fund had no danger of hurting the competition and that it was filed through the “green channel” approach.
DOES AVAILING OF THE GREEN CHANNEL PATH CARRY ANY RISK?
As was already mentioned, the parties must essentially do a previous self-assessment check on the combination overlaps before going for the Green Channel method. It should be noted that the self-assessment that must be included with the Notice in Form 1 states that the automatic approval given under the green route will be void from the beginning of the CCI and later determines that the transaction does not qualify for the Green Channel Approval route or if any information provided along with the form I notice is incorrect.
The ‘Green route’ method is a welcome step to India’s mergers mechanism as it tries to speed up the approval of mergers that are not problematic while minimizing transaction costs and maintaining regulatory scrutiny. Only a few transactions have been handled over Green Channel as of yet. However, pre-filing discussions between parties and CCI authorities may assist to make the ambiguity obvious. Additionally, the CCI must make changes to guarantee those upcoming proceedings are not hampered by similar complexities.
Author(s) Name: Sourabh Kumar Singh (Army institute of law, Mohali)
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Competition Act, 2013, Section 31
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